Food Stamp Program Boosts Farm Income and Jobs

by Kenneth Hanson

While the primary goal of the Food Stamp Program is to help low-income households buy the foods they need for a nutritionally adequate diet, the program also serves another purpose: it increases demand for food products and farm commodities and increases cash receipts for these sectors. ERS researchers estimate that the additional food purchases resulting from each $1 billion of program benefits redeemed generates $97 million in farm cash receipts, which translates into 950 farm jobs and $32 million of income to farmers and hired farmworkers.

In fiscal year 2005, USDA provided $28.6 billion worth of food stamps to needy Americans. When households redeem food stamp benefits at local grocery stores, their food purchases have an impact on production, income, and employment throughout the food system and other sectors of the economy. The magnitude of the impact on agriculture depends on the amount of additional demand for food generated by the program and on the share of the additional food expenditures that goes to the farmer.

Though households may use food stamps only to purchase food for home consumption, the benefits enable them to shift cash otherwise budgeted for food to nonfood expenditures, such as clothing, rent, or child care. Consequently, the additional food expenditure is less than the extra dollar increase in the value of food stamp benefits. An estimated 26 cents of every food stamp dollar goes to additional food demand. ERS used this estimate in a model of the U.S. economy to calculate the effect of additional food expenditures on the farm sector. This model includes the linkages among producers and consumers, as well as the inter-industry linkages among producers. Food stamp participants were assumed to use their program benefits to purchase foods similar to those purchased by low-income households, as determined through surveys on household food expenditures.

On average, each dollar spent on food by low-income shoppers generates 37.3 cents of farm cash receipts, though the magnitude varies by food items. About 55 percent of the cash receipts goes to producers of dairy, poultry, and other livestock, while the remaining 45 percent goes to producers of crops, including feed for animals.